Can you bottle innovation? A growing number of people think that not only can innovation be systematized but that organizations need to take a disciplined approach to fostering innovation as a matter of survival.
Doblin, the innovation practice of Deloitte Consulting, has identified 10 different types of innovation. Many successful companies combine several of the traits they describe. The more categories of innovation that apply to your organization, the greater your edge on competitors.
Profit model innovation is about the way a company makes money. Salesforce.com threw a wrench into the software business 20 years ago with its proposition of delivering software over the internet. Netflix had the radical idea of delivering movies the same way. Both now dominate their industries as nearly every competitor has adopted similar “as a service” models.
Network innovation is about delivering value through connections. Target’s exclusive agreements with brand-name fashion designers is an example from the retail industry. Argo, the joint venture of Ford in Volkswagen, is another. Successful network innovators combine resources in a way that the whole is greater than the sum of the parts.
Structural innovation can take many forms. Whole Foods did it through aggressive transparency, giving employees deep information about the company and building loyalty has a result. A different approach is Uber, which disrupted the personal transportation industry with a model that did away with the need for capital assets.
Process innovation succeeds by changing how things are done in a way that saves money, accelerates speed or creates unique value. For example, Toyota’s stock-in-trade is its excellence in manufacturing. Zara’s reimagined the fashion supply chain to dramatically cut the time needed to deliver new designs to the market.
Product performance is what comes to mind when most people think of innovation. It’s about building products that customers just like better. OXO redesigned everyday items like vegetable peelers and pizza cutters to make them easier and more comfortable to handle, winning it a cult-like following despite its premium pricing. Gorilla Glass’s scratch proof, shatter-resistant product fixed the problem of shattered smart phone screens and earned the company an enviable niche at the high end of the market.
Product system innovation creates value with a line of compatible products that improve customer experience or make a statement. Ryobi’s portfolio of more than 80 tools all use the same battery, saving customers money and encouraging them to stay within the Ryobi product line. Nike customers make a statement when their clothing and devices carry the distinctive swoosh.
Service innovation enhances customer experience through better ease-of-use or enjoyable engagement. Zappos broke out of the pack of online shoe sellers by providing such attentive customer service that phone reps would even help facilitate customer purchases from competitors. Amazon Go is the e-commerce giant’s bid to change retailing by doing away with checkout lines.
Channel innovation simplifies the way products are delivered, usually with contingent benefits. Dollar Shave Club reimagined the delivery of razor blades as a subscription service with cost savings that benefited both the company and its customers. No one has yet cornered the market for 3-D printing, but there are huge opportunities to companies that figure out how to speed product delivery by enabling customers to manufacture them at home.
Brand innovation is perhaps the most difficult to achieve but also the most enduring. It requires creating a distinct identity that is carried through a line of products. Virgin Group, Apple, Tesla and Burberry are just a few examples of companies that do this well. The consistent experience is sometimes hard to define, but customers know it when they see it.
Customer engagement innovation changes the way customers interact with the product and even with each other. For example, Peloton uses video to turn solo exercise into a group experience. The same is true of Blizzard Entertainment’s socially oriented video games while the Nintendo Wii bridges video game interaction to physical spaces.
Innovation is most effective when it creates new platforms for others to build upon. Some of the most important technology brands – like Apple, Microsoft and Facebook – have built huge businesses this way. But platforms needn’t be limited to technology. Toyota’s Scion is an auto framework that can be customized with accessories from Toyota and others. Dremel’s rotary power tools have spawned a huge aftermarket of accessories. Platforms can become self-sustaining and create an almost insurmountable barrier to entry.
Can innovation be taught? Experience suggests that the elements can be understood and used to identify opportunities to differentiate along one or more of these paths. Keen powers of observation, combined with the discipline to respond and remain focused can make any company more innovative.